Video Primer Part 2

The world of online video includes a number of facets – from content for sites, as content for download, to ads that can appear on content and ads that appear before and/or after other video content. When most people say video today, they seem to refer to video hosting and sharing sites, the largest of which is YouTube. Video is in some ways the new land-grab. With the display market approaching ten years old and search growing at more normal speed, much of the attention in online advertising has turned to new mechanisms for reaching users. Dollar for time spent, the Internet still lags behind television, and much has already been written about how the Internet generation consumes media in a method vastly different from the traditional television paradigm. They simply don’t sit and just watch TV. They spend their time consuming, creating, and sharing digital media; a big part of which is video.

In Part 1, we took a very general view of the online video landscape. In Part 2, we take a narrower view and look at some of the events that transpired in just this past week. Video isn’t new, there have been online video ads for years, sites with video clips for just as long, but there weren’t the social networks that act as a distribution channel on crack. And, in times past, even as recently as the beginning of this year, there wasn’t the flow of video traffic that exists today. We now have a history of consumer demand, a clear leader in YouTube, and an industry in flux – from companies jockeying for position to copyright protection struggles. It’s the type of organized chaos that hasn’t been seen since the original Napster hit the scene. Presented here are some of the big pieces shifting in the video world.

• NBC joins online video party – NBC recently announced the formation of a new unit named NBBC – National Broadband Channel. The site, which is almost laughably, if not insultingly, in “Beta”, describes itself as a marketplace for digital video syndication. As a middleman for content owners, advertisers, and web sites, the service appears to fill a logical need. NBC has access to strong content with which they can seed the network; a strong sales force with which they can monetize content, and the clout to line up many of the marquee sites. Despite the ventures Web 2.0 look and feel, something about it just makes you think it will move to slow and operate in a manner counter to a true marketplace. Randy Falco, NBC Universal Television Group president and chief operating officer said recently, "When ‘Saturday Night Live’ had a great clip of Lazy Sunday, YouTube made a lot of money off it… In the future, when we have a Lazy Sunday clip, NBBC will make a lot of money on it." I imagine YouTube wishes they made “a lot of money” off it. By NBC standards, that would be well into the tens of millions.
• Lonelygirl15 more lonely than before – While I can’t claim to have seen a single episode, it appears that creative geniuses have once again duped the viewing population, having created a webcast series that successfully drew in hundreds of thousands of viewers, made no money, and only incurred the ire of this same viewing audience when the seemingly too juicy to be real series was in fact fiction. Seeing their viewers start to spend more time trying to figure out the veracity of its characters, the creators came clean and have moved the series from YouTube to Revver in an attempt to earn advertising revenue. Revver inserts post-roll ads that users must click on to watch, with the revenue generated being split between Revver and the content owner. Similar to YouTube, Revver videos can be embedded in other Web sites, which allows advertisers to hop along for the viral ride. Revver founder and Chief Executive Steven Starr says that "allowing content to move freely across the Internet and monetizing the content wherever it goes” is where the future lies. "The redistribution of the file itself is where the business is heading,” he says. (Source, Forbes.com)

• A tale of two labels – Just as it looked like YouTube was making progress in cleaning up, here comes Universal Music Group trying to show them who is boss. Universal Music Group chief executive Doug Morris has said that YouTube and MySpace are “copyright infringers and owe us tens of millions of dollars”. He continued with, “How we deal with these companies will be revealed shortly.” The record industry has thus far shown they deal in one way – lawsuits. Quips aside, the world of online video has its challenges with respect to copyright protection. Warner Music Group seems to think that YouTube, while filled with unauthorized usage, presents an opportunity for its content. The company recently signed a deal with the video sharing site that as the Wall Street Journal points out, will have WMG posting its catalog of music videos on YouTube and collect an unspecified percentage of the revenue from advertising appearing alongside them. The deal doesn’t cover live performances captured on video cameras or other devices, because Warner doesn’t own the copyrights to those recordings. The YouTube / Warner deal is in many ways monumental, as it takes a leap of faith on revenue that isn’t there but pushes the genre of video and distribution forward. And, while Warner will receive profits, unlike Revver, regular content owners will not. I suspect it is only a matter of time though.
• Microsoft taking on YouTube – The video sharing site must have done something right; as it has attracted the interest of Microsoft, not with respect to acquisition, at least not yet, but as a target. This past week, the software giant released an early version of Soapbox, their YouTube competitor. As News.com explains, users of Soapbox will be able to rate, comment on and tag the videos, create RSS feeds and share links with others via e-mail. They will also be able to embed the Soapbox player directly on to their Web site or blog. Rob Bennett, a stand-up guy, and also general manager of entertainment and video services at Microsoft, said in this same article that MSN’s 465 million visitors a month worldwide would help it give YouTube a run for its money, despite the start-up’s established leadership. Lastly, unlike YouTube, Soapbox will have no advertisements, but Bennett said Microsoft can monetize the video by showing it on the main MSN Video site or by creating a "viral video hub." 

• MySpace to take on YouTube too – Not content being the number one social network, and perhaps feeling envious of Facebook and their billion dollar discussions, News Corp. chief operating officer Peter Chernin told investors at an industry conference that it was time to cut out the middleman in the video hosting business. He estimated that north of 60% of YouTube’s traffic comes from MySpace, and he felt it was time that they controlled the whole environment. Given that YouTube apparently loses several million dollars per month due to bandwidth issues; were I Mr. Chernin, I might be happy to let YouTube have that business until the revenue side is figured out. These sentiments are part of an ongoing trend by MySpace to try and cut back on the number of other sites that leverage the social networking giants traffic. As Pete Cashmore of Mashable.com points out, MySpace has stated its intention to clone the best tools, and Chermin believes that MySpace can equal or better the third party tools with in-house products. Continues Cashmore, “This is such a ridiculous strategy that it’s not even worth contemplating.” If true, it will only hurt MySpace as the tool creators – from custom templates to photo workarounds make for a more rich experience and sticky userbase.

Seeing as YouTube dominates the bandwidth of online video – they have somewhere in the neighborhood of 100 million videos with 65,000 getting added daily, it makes sense that most of the this week’s happenings involve the site in some way shape or form. The real question for YouTube is whether it will become the next Myspace or the next Napster. The latter was equally, if not more, popular but couldn’t find a common ground to stay in business. YouTube is benefiting from something the original Napster did not – a willingness by many of the major labels to find a way to leverage the site’s distribution prowess and access to consumers. In the end there might not be much difference except time and realizing that what we saw with Napster is not going away.